Determine the operating cash flow:
E4-1 The installed cost of a new computerized controller was $65,000. Calculate the depreciation schedule by year assuming a recovery period of 5 years and using the appropriate MACRS depreciation percentages given in Table 4.2 on page 117.
(1) 65,000 20% 13,000
(2) 65,000 32 20,800
(3) 65,000 19 12,350
(4) 65,000 12 7,800
(5) 65,000 12 7,800
(6) 65,000 5 3,250
Totals 100% 65,000
E4-2 Classify the following changes in each of the accounts as either an inflow or an outflow of cash. During the year (a) marketable securities increased, (b) land and buildings decreased, (c) accounts payable increased, (d) vehicles decreased, (e) accounts receivable increased, and (f) dividends were paid.
(a) Marketable securities cash outflow
(b) land and buildings decreased cash inflow
(c) accounts payable increased cash inflow
(d) vehicles decreased cash inflow
(e) accounts receivable increased cash outflow
(f) dividends were paid cash outflow
E4-3 Determine the operating cash flow (OCF) for Kleczka, Inc., based on the following data. (All values are in thousands of dollars.) During the year the firm had sales of $2,500, cost of goods sold totaled $1,800, operating expenses totaled $300, and depreciation expenses were $200. The firm is in the 35% tax bracket.
Operating Cash Flow
Kleczka, Inc.
Sales 2500
Less: Cost of Goods Sold -1800
Gross Profit 700
Less: Operating Expenses - 300
Operating Income 400
Add: Depreciation 200
Operation Cash Flow 600
Less Tax 210
Net Operating Cash Flow 390
E4-4 During the year, Xero, Inc., experienced an increase in net fixed assets of $300,000 and had depreciation of $200,000. It also experienced an increase in current assets of $150,000 and an increase in accounts payable and accruals of $75,000. If operating cash flow (OCF) for the year was $700,000, calculate the firm's free cash flow (FCF) for the year.
Operating Cash 700,000
Depreciation +200,000
900,000
Increase in current assets - 150,000
750,000
Increase in current Liabilities 75,000
825,000
E4-5 Rimier Corp. forecasts sales of $650,000 for 2013. Assume the firm has fixed costs of $250,000 and variable costs amounting to 35% of sales. Operating expenses are estimated to include fixed costs of $28,000 and a variable portion equal to 7.5% of sales. Interest expenses for the coming year are estimated to be $20,000. Estimate Rimier's net profits before taxes for 2013.
Rimier Corp
Pro Forma
Income Statement 2007
Sales Revenue 650,000
Less: Cost of Goods Sold
Fixed Cost 250,000
Variable Cost (0.35 x sales) 227,500
Gross Profits 172,500
Less: Operating Expenses
Fixed Expense 28,000
Variable Expense (0.075 x sales) 48,750
Operating Profits 95,750
Less: Interest Expense (all fixed) 20,000
Net Profits before Taxes 75,750